STRATEGIES TO SUCCEED IN THE FAST EVOLVING

PREMIUM BEAUTY MARKET

September 2013
PREMIUM BEAUTY PERFORMANCE

Premium players emphasise experience to drive growth

 The 2008-2009 recession was a difficult period for

the leading premium players, with growth rates
falling sharply in 2009. Shiseido’s sharp growth in
2010 was due largely to the acquisition of Bare
Escentual rather than organic growth. While cash-
strapped consumers limited their purchases,
premium cosmetics also faced competition from
the masstige brands that were marketing products
on the basis of more sophisticated product
technology, further appealing to consumers
seeking to spend less.
 To combat competition from the masstige brands,
premium cosmetics players decided to focus on
enhancing the brand experience to help distinguish
their premium brands from masstige brands. Brand
experience took the form of offering more
customised solutions, while increasing interaction
with consumers both in store and in the digital
space. In addition, premium players sought to
develop a greater presence across the pricing
spectrum, to make their products accessible to a
wider range of consumers, with different levels of
affordability.

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COMPETITIVE LANDSCAPE

Premium cosmetics a consolidated market

 The premium cosmetics market is highly

consolidated with the top 10 players accounting for
62% of the total premium beauty market in 2012,
compared to 62% in 2007. While some
manufacturers market both premium and mass
cosmetics, half of the top 10 players are dedicated
premium players. These players, led by Estée
Lauder, accounted for a third of global premium
market value in 2012.
 The top 10 players’ rankings remained fairly stable
over the review period. Most companies retained
their positions, with the exception to L’Oréal, which
replaced Estée Lauer to become the market leader
in 2008. and Amway overtaking Clarins to take
ninth place in 2009.
 The reason for little movement in industry
consolidation is because competitiveness has
become more and more resource consuming,
particularly after the emergence of masstige
brands. Manufacturers of premium beauty are
required to add considerable value in terms of
innovation and marketing to distinguish themselves
in the market.

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COMPETITIVE LANDSCAPE

Premium business with a focus

 International manufacturers’ premium cosmetics business tend to be mostly concentrated on a limited

number of key categories, such as skin care and fragrances, in which manufacturers are more likely to
attract and retain consumers through dedicated product innovation.
 Premium players are committed to building up limited but strong brands to cater to consumers’ various
needs, achieving economies of scale in leveraging brand equity across multiple categories. Premium colour
cosmetics, for example, has benefited from key innovations in skin care, with manufacturers leveraging
attributes and brand awareness across the categories.
 Premium sets/kits is a small but important category that manufacturers use to attract new customers, and
reward, or introduce new products to existing customers. Manufacturers offering sets/kits also benefit
during the gift seasons.

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KEY STRATEGIES AND CASE STUDIES

Key trends in product innovation

 Product innovation has been the centre of many players’ business strategy in driving value growth. For
premium players, this is particularly important in order to satisfy consumer demand and justify the premium
price points these products carry.
 At a time of uncertain economic development, major players have competed on product innovation to
expand and sustain their customer base. Major trends in product innovation include:

Exclusivity
High-tech Targeted Category
and
Efficacy Innovation Crossover
Sophistication

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KEY STRATEGIES AND CASE STUDIES

The convenience of the internet fuels digital involvement

 The penetration of internet

access grew at double-digit
rates over 2007-2012,
E- increasing the number of
commerce internet users to 2.4 billion
worldwide by 2012, with 35% of
the population using the internet
for shopping.
 The convenience of the internet
M- Social has encouraged industry players
Commerce Media to explore digital involvement in
many ways, from e-commerce
Digital to mobile apps.
 It has become a norm for
industry players to expand their
presence online, utilising
advanced technology to revamp
the appearance of products
In-store Services displays, raise consumer
Digital Experience awareness of products and
brands, and increase consumer
engagement with brands.

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